To the Shareholders:

As Chairman of the Board of Directors and in accordance with the Company Statutes, I hereby submit for your consideration the Annual Report, the Balance Sheet and the Statement of Income of Watt's S.A. for the period ended on December 31, 2007.

The first comment I wish to make is that 2007 has been a very good year, with great achievements for the company. We have reached an increase in sales of over 8.8% and an operating result of CLP 12,261 million, an increase of 18% over the previous year. The final result, though appearing to be less than last year, is due to an extraordinary profit of CLP 16,097 million achieved in the year 2006 as a consequence of the formation of the joint venture established that year with CCU, called Promarca.

The most important fact is that the good results during 2007 have been achieved thanks to the significant improvements in our operating and commercial activities, both in Chile and in our external subsidiaries

Among the principal milestones during the year, I would like to highlight the following:

• The stability of an excellent working climate, something quite different to that observed in other industries in the country. The best proof of this affirmation is the fact that we closed four collective negotiations during the year which were to the entire satisfaction of all parties. Furthermore, the internal Opinion Poll on the Internal Working Climate this year showed that the levels of approval of the company's performance in this respect surpassed 90%, supported by a level of constant dialogue and confidence in mutual promises.

• The operational and logistics improvements in our plants, with important investments in equipments and warehouses, have resulted in increases in the efficiency of the equipment, in the quality of the products and in the level of service to customers, supporting the recovery of the commercial relations which had suffered a degree of deterioration as a result of the start-up of the Lonquén Plant in 2006.

• The significant achievements in the commercial area, the most important of these being the recovery of the leadership in margarines (with a great launch of Loncoleche Más Vida), the duplication of the Chef pasta business, particularly its launch into the market of fresh pasta, the absorption of the Santa Carolina wine business in the local market without losing volume and gaining in profitability, amongst other projects.

• On the extreme fronts, I wish to highlight the incursion into new markets such as China and the successful participation of the export area in international trade fairs, particularly in Exposial in Shanghai, which motivated a project to open a commercial office in China in 2008.

• Our external subsidiaries have also shown important improvements with good results in Argentina, despite the complex internal environment characterized by much state intervention, whilst in Peru we have achieved record sales after important changes in its organization structure.

• Finally, in 2007 we initiated the Promarca operation, our joint venture with CCU in beverages and we have already achieved significant improvements in the coordination of the various launches by both companies, starting with Watt's Kids, a nectar directed at children.

There are many other subjects I could highlight, but in those mentioned above I have tried to summarize some milestones which are perhaps the most visible. What is most important is that each one of these factors has supported the good results achieved during the year in a context of great difficulties. 

Probably the most complex of these has been the need to compensate the tremendous variations in costs reflected in almost all our strategic raw materials, given the increases in milk, oils and fruit concentrates that, in accordance with world trends, had never been seen in its current magnitude in history. If we add to all this the increases in the cost of energy, the scenario we had to live with in 2007 must be one of the most complex that could have arisen for the company. Once more, the great organization which is Watt's has demonstrated its ability to react and its flexibility to face changes, in addition to its commitments with each one of its members to rise successfully from the requirements our activities demand. The favourable results for this year 2007 make us all proud and must serve as support in our continuing growth, both in Chile and abroad.

Despite the current complex situation, characterized by an increase in the levels of inflation, a fall in exchange rates, greater costs of energy and an increase in employment and environmental regulations, we have confidence in the future and we shall reinforce our investments in internal efficiency and growth projects. To grow efficiently is the path we have defined for the future of Watt's S.A.

Fernando Larrain Peña
Chairman, Watt's S.A.